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Era ends as Hill Samuel loses its deal-makers

Peter Rodgers Financial Editor
Friday 31 May 1996 23:02 BST
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A City era ended yesterday when Close Brothers took over the corporate finance business of Hill Samuel, which once did some of the biggest takeover deals in the London markets.

The purchase from Lloyds TSB for an undisclosed price brings a team of 60 people and 50 quoted clients to Close Brothers, a rising City star taking over one that has been fading since it was bought by TSB in 1987.

Lloyds TSB group continues to own Hill Samuel's corporate and private banking and fund management sides, which are far larger than the corporate finance team.

But the departure of the team ends a key link with Hill Samuel's glory days from the 1960s to the mid-1980s, when it was home of some of the City's best known corporate finance superstars, who at the time vied with Warburg at the top of the big league of takeovers and privatisations.

It has been an open secret that the Lloyds TSB group is uninterested in expanding its work in bids and deals, while Close Brothers has declared it wants to grow rapidly in the area.

Among Hill Samuel's best known 1980s deals were the privatisation of British Airways and the 1984 onslaught on Allied Lyons by Elders of Australia, the first pounds 1bn plus leveraged bid in the UK. Hill Samuel acted for Elders.

But by the time of Big Bang in 1986, traditional merchant banks were coming under heavy pressure to find new capital backing to compete with US investment banks and the clearing banks.

In 1987, Hill Samuel thought it had agreed a takeover by Union Bank of Switzerland. UBS pulled out at the last minute, leaving the London bank, then under Sir Robert Clark - its last chairman as an independent bank - floundering around looking for a partner.

On the rebound, it sold out to TSB in October 1987, at a price of pounds 777m which proved an extraordinarily good deal for shareholders because it was agreed just before the stock market crash.

However, under TSB's leadership, Hill Samuel went on a lending spree to large companies that in 1991 sent it pounds 440m into the red, and the bank and its corporate finance department never regained their former stature.

The corporate finance department then led the rescue of the Brent Walker group, one of Hill Samuel's ill-starred borrowers, but it failed to regain its high City profile. The team's best known recent work has included the National Lottery and the Channel Tunnel Rail Link.

Close Brothers, which is capitalised at pounds 450m, already has a small corporate finance team with 30 clients and about 20 staff.

John Llewellyn-Lloyd, head of Hill Samuel corporate finance, said the merged team would be comparable with those at other medium size merchant banks such as Lazard, Hambros and Charterhouse.

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